Loan modification activity continues to rise as delinquent homeowner look for help.  Mortgage loan modification agreements have helped many homeowners salvage their homeownership with lower mortgage payments, but not everyone qualifies.  Mortgage modifications and loan workouts are successfully negotiated when the borrower has a job and has the ability to afford the revised loan payment.

A new cycle of mortgage bills arising from the high number of home foreclosures in the Inland area and around California is moving through the Legislature, following major initiatives at the state and federal levels in the past year.

The bulk of the new state proposals expand protection for renters living in foreclosed properties, create new rules for reverse mortgages, and impose standards on loan-modification consulting companies, such as banning them from taking advance payments from troubled homeowners.

Some industry groups and lawmakers question the need for more state legislation so soon after Congress and the Legislature approved measures to address the foreclosure problem.  Some of the laws have been on the books for only a relatively short while. 

A 90-day foreclosure moratorium approved as part of the February budget package takes effect Monday.  “It’s premature to add new legislation on top of what we have before we see what the results are,” Dustin Hobbs, of the California Mortgage Bankers Association, said. “We’re not saying more action can’t be taken down the road. But let’s see what happens first.”  But supporters say much remains to be done to address the state’s foreclosure problem, and to prevent it from happening again.

Paul Stein, associate director of the California Reinvestment Coalition, which advocates for low-income residents in the financial sector, said Congress is taking the lead in crafting foreclosure-related fixes. Those include possibly making it easier for bankruptcy judges to modify mortgage payments for struggling borrowers.

There is still a large role for the state to play, he said.  “It’s still the case that … financial institutions are not accountable for the impacts of foreclosures on borrowers and communities. They’re really not obligated to help anybody,” Stein said.

Home Loan Defaults Rise

Foreclosures have been a major burden on the Inland economy. In April, there were almost 5,000 notices of default filed in Riverside County, according to ForeclosureRadar, a tracking service. The notices are the first step in the foreclosure process. The county had the fourth-highest rate of foreclosure sales last month.

San Bernardino County had about 4,000 notices of default and the seventh-highest rate of foreclosure sales in April.  The main state foreclosure law to emerge last year was SB 1137. It requires lenders and loan servicers to talk with borrowers before starting foreclosure proceedings. The aim is to get more loan modifications.  This year, lawmakers introduced more than 30 foreclosure- and mortgage loan modificationj related bills. Nearly all of the authors are members of the Legislature’s Democratic majority.  About 24 measures are still pending, with most facing a Friday deadline to clear the Legislature’s appropriations panels.

Some of the foreclosure prevention bills would put the state in compliance with the federal Secure and Fair Enforcement of Mortgage Licensing Act approved in July 2008.  The law requires mortgage loan originators to be licensed and complete 20 hours of pre-licensing legislation, along with other requirements.  It wasn’t clear whether mortgage lenders and banks would be exempt from this new licensing requirement.

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